ORDER
Jeet Ram Kait, Member (T)
1. These appeals by Revenue are directed against Order-in-Appeal No. 13/98 (M-II) dated 13.2.1998 by which the learned Commissioner (Appeals) has held that the value of the bought out items supplied along with manufactured items is not to form part of the value of the CNG conversion kits manufactured by respondent-assessee.
2. Aggrieved with this order, the revenue has come in appeal on he ground that operation of putting two materials separately has been carried out outside the factory but in the instant case, it is being done within the factory and despatched along with manufactured items. It is, further, submitted that the Commissioner (Appeals) has not discussed whether the said items are essential or not. They have, further, submitted that the Commissioner (Appeals) ought to have taken note of Ministry’s letter F.No. 151/1/95-CX.4 dated 27.6.1996 which stated that the cable joining kits assembled from duty paid components are correctly classifiable under heading 85.47 which itself will be a precedent for the said issue. In view of above submission, the Revenue requests that the Commissioner (Appeals) order may be set aside and the Order-in-Original passed by the Asst. Commissioner be restored.
3. Heard Ld. DR Shri C. Mani who reiterates the department’s stand.
4. None appeared for respondent-assessee despite notice. They have filed cross-objections pleading for sustaining the order of Commissioner (Appeals).
5. We have considered the submissions made by the revenue and the Order-in-Appeal passed by the learned Commissioner in this case. The assessee are putting the finished manufactured components and the bought out components in a package and supplying as a kit. Revenue wants that since the manufactured components and bought out finished components are put in a package and cleared from the factory as a kit, the value of bought out items should be added to the assessable value, whereas the case of the respondent-assessee is that the value of the bought-out items has to be excluded. The Ld. Commissioner (Appeals) has been consistently holding that the value of the bought out items are not to be included and by relying on the order passed by him earlier, he has decided that the value of the bought out items supplied along with manufactured items is not to form part of the value of the CNG conversion kit manufactured by the appellants. We extract the paragraphs 4 & 5 of his order herein below:
4. I find force in the pleadings of the appellants. I find that in para-5 of my order-in-appeal cited above, I have held as follows:
5. …As mentioned by the appellants, the Tribunal in the case of Kalinga Paints and Chemicals Ltd. have held as follows:
We observe that the only product that the appellants were manufacturing in their Factory was aluminium medium. Alter paying duty on the same, they cleared it and put this in a separate packing along with the packed aluminium paste in respect of which the duty had already been paid and put the two in a common container for the purpose of marketing. The operation of putting the two materials separately, it is not denied, has been carried out outside the factory. It has not been shown to us that putting these separately manufactured products in a common container, amounts to manufacture. It may well be a final product for a particular consumer and use emerges after the two are mixed, but until it has been done, it has to be shown as to whether under the law by putting the two items together separately packed condition would amount to manufacture. There is no plea before us that this is so nor is our view this can be held as manufacture in terms of Section 2(f) of the Act. We therefore, hold that the Collr. (Apples) was right in holding that in as much as the appellants manufactured only Aluminium medium, the duty was liable to be paid only on that product. The appeal is therefore, rejected.
Further, the CEG AT-vide their order No. 1617/97 dated 18.6.97 wherein the Tribunal have held:
The Revenue is aggrieved of the findings of the learned lower authority that the value of the bought out items which are sold along with some items manufactured by the respondents as Kit is not required to be added as no new product came to be manufactured by selling the goods together in one lot. The learned lower authority has relied on the decision of the Tribunal in the case of Carbon Industries P. Ltd. v. CCE, Madras .
The CEGAT further held:
We have considered the pleas made by the Revenue and also perused the order of the learned lower authority. We observe that the learned lower authority has taken note of the ratio laid down by the Tribunal in the case of Carbon Industries P. Ltd., wherein the following has been set out in paras 5 and 4 respectively of the separate concurring orders of the two Members:
5. We have carefully considered the submissions of both sides. It is not in dispute that the carbon elements were manufactured with the aid of power by the appellant who paid duty thereon under Item 68 CULT. It is also not in dispute that the appellant bought the other items from the market and supplied A.D. wet cells in unassembled condition to the Railways. The only dispute is whether such unassembled cells are liable to duty under Item 68 C.H.T. The appellants say that they do not subject bought-out items to any manufacturing process and do not manufacture the complete cells. They supplied the cells in unassembled condition. The department’s case is that the unassembled cells fall under Item 68 CUT. While the appellants question this stand, their alternative stand is that even if it be assumed that they were manufacturing complete cells, they would still be not liable to pay any duty thereon because goods falling under Item 68 C.E.T. manufactured without the aid of power are exempt from payment of duty and the appellants do not use any power in the operations (save into the manufacture of carbon or zinc elements) leading to the supply of cells in unassembled condition. This claim is based on Central Excise Notification No. 179/77, dated 18.6.1977, which exempts all Item 68 goods in or in relation to the manufacture of which no process is ordinarily carried on with the aid of power. In the present case, admittedly, power is used in the manufacture of carbon and zinc elements. In the context of the expression, “in or in relation to the manufacture of which no process is ordinarily carried on with the aid of power”, it cannot be said that no power is used in the manufacture of cells, since power is used in the manufacture of carbon and zinc elements which are necessary components of the cells. The appellant’s contention in this behalf is not tenable. Bui the question remains whether the appellants manufactured complete cells i.e., whether there has been “manufacture” of A.D. wet cells. In the appellant’s premises. The appellants supplied complete sets of cells admittedly in unassembled condition, the order is for complete sells. The supply is as stated above. The appellants have also submitted a photo copy of their instruction sheet for the assembly of the cell. If they had assembled the cells the benefit of exemption under Notification No. 179/77, would not be admissible. The question, then, really bolls down to this does the supply of the different components of the complete cells admittedly in unassembled condition-amount to manufacture of the complete cells, the Departmental Representative has relied upon 1983 HLT 681 (Mad.) in this connection. In that case, taking into account the exigencies of manufacture, package and transport and the consumer understanding of the trade and commercial community, the court held that a cycle despatched in a C.K.D. condition was a cycle within the meaning of Item 35 C.E.T. The appellant in that case was T.I. Cycles, a well known cycle manufacturer who, presumably manufactures most, if not all, of the parts that go to make up a complete cycle. Here on the evidence available on record the appellant manufactures only carbon and zinc elements and paying duty thereon under Item 68 C.E.T. He procures all the remaining components and materials from outside and supplies the cells in unassembled condition. There is no assembly of the cells for manufacture of the components and materials other than the carbon and zinc elements, undertaken by the appellants. The ratio of the decision in the T.I. cycles case is not, therefore, applicable to the facts of the case.
In the case Callcut Refrigeration Co. v. CCE, Cochin and Ors. 1982 ELT 106 (Ker.) referred to by the Madras High Court in 1983 ELT 68 the supplier of the different components of the Ice-cream combination cooler (purchased by him from the market), the framework and the cutting and bending of the coils being done by the supplier at his own workshop, assembled the components at the premises of the purchaser, the only question being whether having regard to the nature of the assembly, the assembled unit could be termed as a ‘ready assembled unit’ under Item 29A CET. Such is not the case here-there was no assembly of the complete cell at the premises of the Railways by the appellants. In 1980 ELT 280 (Bom.) Blue Star Ltd. v. Union of India and Anr. the petitioner undertook an elaborate process of setting up and assembly of a walk-in-cooler at the buyer’s premises from out of the bought-out components and the panel assembly and some other item of work undertaken at the petitioner’s factory. The Bombay High Court held that the cooler could not said to be a ready-assembled unit of walk-in-cooler offered for sale by the petitioner, the assembly and installation work was not a matter of merely getting together the parts and components with nuts and bolts. Again, it has to be noted that, in the present case, there has been no assembly of the components by the appellants in the Railway’s premises.
In the view which we have taken, we have not found it necessary to refer to and discuss the Bombay High Court decision in (35) STC 1975 page 502. Apart from this consideration, that decision was given in the context of Section 2(17) of the Bombay Sales Tax Act, 1959 which is not pan materia with Section 2(f) of the Central Excise and Salt Act.
4. There is a serious flaw in the lower authorities’ proceedings. A complete electric battery is not assessable under Item 68. The only item for such a battery is Item 31 of the Central Excise Tariff. It is not clear to me any duty under Item 68 should be paid again on the purchased parts, because there is no allegation that these purchased parts had not paid duty when they were brought to this factory. Articles bought in the market cannot be charged duty again unless it is shown that they had not paid the duty that they should have paid. In the absence of allegation to this effect, one must take it that the purchased parts of the battery had paid whatever duty was leviable on them. That duty may be either under Item 68 or under some other item. If it is Item 68, there is no case for collecting the duty again who they are taken out by this factory, namely, M/s. Carbon Industries Pvt. Ltd., if they have not been subjected to any manipulation or process to change their composition or use or other essential character. If the appropriate item was some other item, we have not been told what that heading is. And it is no answer to charge duty under Item 68 when the appropriate rate of duty was some other item. In any case, since the central excise say that the factory had not paid the appropriate rate of duty on those parts and then proceed to collect duty under Item 68, we can take it that duty under Item 68 was the appropriate rate in the eyes of the central excise. There is, therefore, no case for charging duty under Item 68 again.
The CEGAT further held:
The ratio of the decision in our view squarely applies to the facts of this case. The ratio of the decision cited by the Revenue is in the context of levy of duty on the goods which are put together and which could be assembled into a pressure cooker. In that case the collection of various components should be considered as an item in CKD condition and by merely screwing various parts together the item emerges as pressure cooker. The facts in this case are quite different from the facts of that case. In the present case we find that various parts which were sold as tool kit did not by themselves by putting them together form be a CKD pack for bringing. Into existence a new product having a distinct name, and character and use. These parts were put together for the convenience of the user and since these parts were collectively known as Service Kit could not, change the character of the individual parts as such. These individual parts therefore for the purpose of levy of Central Excise duty had to be treated as Independent entities. The goods which the appellants were manufacturing themselves therefore above were required to suffer duty before the same were cleared as parts of the Kit. The goods which were purchased from outside would be like any goods which have been brought into the factory and in respect of which duty has been paid or which have been cleared after complying with the requirements of law. These goods by reason of branding could not be said to have undergone any process of manufacture as branding on the motor vehicle parts is not described as process of manufacture either under the Central Excise Act or under the Chapter Notes and Section Notes of the tariff. We are therefore of the view that the learned lower authority has lightly held that the value of the bought out items would not be required to be included. The appeal of the Revenue is therefore dismissed.
Respectfully following the ratio of the Tribunal decisions cited above, I hold that bought out items, viz., the installation parts are not chargeable to duty and that the value of the bought out items, supplied along with the manufactured items is not to form part of the value of the CNG conversion kit manufactured by the appellants.
5. In the light of the above, the impugned order is set aside (including para 4 of the order portion), and the appeal is allowed.
6. From the extracted portion of the order the Ld. Commissioner (Appeals), we find that he has discussed the various judgments rendered by the Tribunal as well as the Hon’ble High Court and has decided the case after following the ratio of the Tribunal’s decision cited above. Therefore, we do not find any infirmity in the order passed by the learned Commissioner (Appeals) and are in agreement with his order. We, therefore, sustain the order passed by the learned Commissioner (Appeals) by rejecting the appeals filed by Revenue. The cross objections filed by assessee also gets disposed of accordingly.
(Dictated and pronounced in open Court).